Offshore Technology Past, Present and Future

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1 Offshore Technology Past, Present and Future Houston Association of Professional Landmen J. Keith Couvillion Chevron U.S.A. Inc. October 7, 2015 Copyright 2015 Chevron U.S.A. Inc. All Rights Reserved.

2 Cautionary Statement CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This presentation of Chevron Corporation contains forward-looking statements relating to Chevron s operations that are based on management s current expectations, estimates and projections about the petroleum, chemicals and other energy-related industries. Words or phrases such as anticipates, expects, intends, plans, targets, forecasts, projects, believes, seeks, may, could, schedules, estimates, budgets, outlook, on schedule, on track and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond the company s control and are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this presentation. Unless legally required, Chevron undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are: changing crude oil and natural gas prices; changing refining, marketing and chemicals margins; actions of competitors or regulators; timing of exploration expenses; timing of crude oil liftings; the competitiveness of alternate-energy sources or product substitutes; technological developments; the results of operations and financial condition of equity affiliates; the inability or failure of the company s joint-venture partners to fund their share of operations and development activities; the potential failure to achieve expected net production from existing and future crude oil and natural gas development projects; potential delays in the development, construction or start-up of planned projects; the potential disruption or interruption of the company s production or manufacturing facilities or delivery/transportation networks due to war, accidents, political events, civil unrest, severe weather, other natural or human factors, or crude oil production quotas that might be imposed by the Organization of Petroleum Exporting Countries; the potential liability for remedial actions or assessments under existing or future environmental regulations and litigation; significant investment or product changes required by existing or future environmental statutes, regulations and litigation; the potential liability resulting from other pending or future litigation; the company s future acquisition or disposition of assets and gains and losses from asset dispositions or impairments; government-mandated sales, divestitures, recapitalizations, industry-specific taxes, changes in fiscal terms or restrictions on scope of company operations; foreign currency movements compared with the U.S. dollar; the effects of changed accounting rules under generally accepted accounting principles promulgated by rule-setting bodies; and the factors set forth under the heading Risk Factors on pages 22 through 24 of the company s 2014 Annual Report on Form 10-K. In addition, such results could be affected by general domestic and international economic and political conditions. Other unpredictable or unknown factors not discussed in this presentation could also have material adverse effects on forward-looking statements. Certain terms, such as unrisked resources, unrisked resource base, recoverable resources, and oil in place, among others, may be used in this presentation to describe certain aspects of the company s portfolio and oil and gas properties beyond the proved reserves. For definitions of, and further information regarding, these and other terms, see the Glossary of Energy and Financial Terms on pages 58 and 59 of the company s 2014 Supplement to the Annual Report and available at Chevron.com. As used in this report, the term project may describe new upstream development activity, including phases in a multiphase development, maintenance activities, certain existing assets, new investments in downstream and chemicals capacity, investment in emerging and sustainable energy activities, and certain other activities. All of these terms are used for convenience only and are not intended as a precise description of the term project as it relates to any specific government law or regulation Chevron U.S.A. Inc. All rights reserved. 2

3 Agenda Offshore Defined Oil & Gas Lifecycle Seismic Drilling Facilities (Fixed, Floating & Subsea) New Technologies Questions Photo courtesy of Transocean 2015 Chevron U.S.A. Inc. All rights reserved. 3

Government Controlled Offshore Lands United States - Exclusive Economic Zone (3 Billion

State/Federal Offshore Jurisdiction State jurisdiction is defined as those submerged lands seaward of the coastline to a distance of approximately 3 geographical miles (4.83 km).

6 State/Federal Offshore Jurisdiction State jurisdiction is defined as those submerged lands seaward of the coastline to a distance of approximately 3 geographical miles (4.83 km). The offshore jurisdiction of the Gulf coast of Florida and the State of Texas is 3 marine leagues (approximately 10 miles) seaward. Federal jurisdiction is defined under accepted principles of international law. The seaward limit is defined as the farthest of 200 nautical miles (370 km) seaward of the baseline from which the breadth of the territorial sea is measured or, if the continental shelf can be shown to exceed 200 nautical miles, a distance not greater than a line 100 nautical miles from the 2,500-meter isobath or a line 350 nautical miles from the baseline. Source: Chevron 2015 Chevron U.S.A. Inc. All rights reserved. 6

Offshore Gulf of Mexico Activity Map 2015

Offshore Oil & Gas Lifecycle Photo courtesy of

10 Explore, Develop, Produce & Abandon Photo courtesy of Transocean 1. Explore & Lease 2. Drill, Discover & Appraise 3. Plan Development 4. Design 5. Fabricate & Install 6. HUC, Start Up & Ramp Up 7. Production Operations 8.Plug & Abandon 2015 Chevron U.S.A. Inc. All rights reserved. Source: Chevron 10

13 Geographic & Geologic Provinces of the Gulf of Mexico Basin Texas Louisiana Houston Salt Dome Province Shelf Deepwater Salt Ridge Province Salt Canopy Province Lower Tertiary (Wilcox) Trend Miocene Trend Norphlet Trend Source: Chevron 2015 Chevron U.S.A. Inc. All rights reserved. 13

BOE discovered to date in Deepwater (end-2013) Future deepwater discoveries estimated at ~14 billion BOE Depths 5.000 10.000 15.000 20.

14 The Deepwater Gulf of Mexico A Prolific Oil-Rich Petroleum System Lower Tertiary Trend Gulf of Mexico Miocene Trend Prolific Petroleum Basin 9 billion BOE produced in Deepwater alone 49 billion BOE produced to date from Shelf alone Significant Resource Potential 24 billion BOE discovered to date in Deepwater (end-2013) Future deepwater discoveries estimated at ~14 billion BOE Depths Deepwater Shelf * Source: Wood Mackenzie (October 2013) 2015 Chevron U.S.A. Inc. All rights reserved. 14

Seismic Imaging Technology Advances Seismic courtesy of

17 Offshore Lease Sales Sale No. Area Year 229 Western Gulf of Mexico Central Gulf of Mexico Western Gulf of Mexico Eastern Gulf of Mexico Central Gulf of Mexico Western Gulf of Mexico Central Gulf of Mexico Western Gulf of Mexico Eastern Gulf of Mexico Central Gulf of Mexico Chukchi Sea Western Gulf of Mexico Cook Inlet Central Gulf of Mexico Beaufort Sea Chevron U.S.A. Inc. All rights reserved. Source: Department of the Interior 17

18 Offshore Lease Blocks G /31/2008 ExxonMobil G /31/2008 ExxonMobil G /30/2008 Union Oil CA G /30/2007 ExxonMobil G /30/2007 Chevron USA G /30/2007 ExxonMobil G /31/2007 Union Oil CA G Union Oil C WR627 WR628 WR629 WR630 WR631 WR632 WR633 G /31/2014 ExxonMobil G /31/2008 ExxonMobil G /30/2007 ExxonMobil G /30/2007 Chevron USA G /30/2007 ExxonMobil G /30/2007 Union Oil CA G Union Oil C WR671 WR672 WR673 WR674 WR675 WR676 WR677 G /30/2006 Chevron USA G /31/2014 ExxonMobil G /31/2014 ExxonMobil G /30/2007 ExxonMobil G /30/2007 ExxonMobil G /30/2007 Chevron USA G /31/2008 ExxonMobil G Shell Offsh WR715 WR716 WR717 WR718 WR719 WR720 WR721 G /30/2006 Chevron USA G /30/2007 ExxonMobil G /30/2007 ExxonMobil G /30/2007 ExxonMobil G /30/2007 ExxonMobil G /31/2008 BP E&P G /30/2010 BP E&P G BP E&P WR759 WR760 WR761 WR762 WR763 WR764 WR765 G /31/2008 Chevron USA G /31/2008 Devon LA G /30/2007 ExxonMobil G /30/2007 ExxonMobil G /31/2008 ExxonMobil G /31/2006 BP E&P G /31/2006 BP E&P G BP E&P WR803 WR804 WR805 WR806 WR807 WR808 WR809 G /31/2008 G /31/2008 G /31/2008 G /31/2008 G /31/2008 G /30/2008 G /30/2008 G Chevron U.S.A. Inc. All rights reserved. Source: Chevron 18

20 Drilling Exploratory & Appraisal Wells Photo courtesy of Transocean 1. Explore & Lease 2. Drill, Discover & Appraise 3. Plan Development 4. Design 5. Fabricate & Install 6. HUC, Start Up & Ramp Up 7. Production Operations 8. Plug & Abandon 2015 Chevron U.S.A. Inc. All rights reserved. Source: Chevron 20

Permitting & Drilling Operations Photo courtesy of

12,000 Semi-submersible Rig Water Depths up

Anchor Prospect Green Canyon Blocks 762, 763, 806, 807 Description: Anchor is a large, well-defined exploration prospect in south-central Green Canyon.

Drilling is underway in the exploratory well at a depth of 25,300. Analog: GC 847 #1 Turtle Lake Wilcox Resource Potential:?

Approved Unit Boundary THESE DATA ARE PREPARED FROM THE BEST SOURCES AVAILABLE AT THE TIME OF PREPARATION.

24 Anchor Prospect Green Canyon Blocks 762, 763, 806, 807 Description: Anchor is a large, well-defined exploration prospect in south-central Green Canyon. The primary objective is a three-way Wilcox closure against salt with a Miocene closure in the northwestern part of the structure. Drilling is underway in the exploratory well at a depth of 25,300. Analog: GC 847 #1 Turtle Lake Wilcox Resource Potential:??? MMBOE Objective Depth: 31,450-34,200 TVDSS AFE: $179MM Anticipated TD: December 2014 Deal Terms: To be negotiated Contact: John Doe GC 807 Anchor BSEE Approved Unit Boundary THESE DATA ARE PREPARED FROM THE BEST SOURCES AVAILABLE AT THE TIME OF PREPARATION. CHEVRON DOES NOT WARRANT OR GUARANTEE ITS ACCURACY, NOR DOES CHEVRON ASSUME ANY RESPONSIBILITY OR LIABILITY FOR RELIANCE THEREON. CHEVRON RETAINS THE RIGHT TO NEGOTIATE OR REFUSE TO NEGOTIATE WITH ANY AND ALL PARTIES CONCERNING THIS PROJECT. THIS IS NOT AN OFFER Chevron U.S.A. Inc. All rights reserved. Source: Chevron 24

extending from 1 block to 9 blocks Reservoirs with relatively low permeability requiring advanced completions Relatively

25 Drilling Challenges in Deepwater 4,000-8,000 water depth Sea Level 8,000 16,000 24,000 24,000 32,000 32,000 40,000 ~1500 feet Deep wells at 26,000-35,000 High pressure reservoirs at ~20,000 psi Thick reservoir intervals >1,000 Broad reservoirs extending from 1 block to 9 blocks Reservoirs with relatively low permeability requiring advanced completions Relatively lower recovery factors without advanced technologies 40, Chevron U.S.A. Inc. All rights reserved. Source: Chevron 25

Deepwater Well Design Constructing a well takes time and requires a variety of people working on various components Certain wells can take up to a

26 Deepwater Well Design Constructing a well takes time and requires a variety of people working on various components Certain wells can take up to a year to plan and design Internal governance processes ensure a viable well design Source: Chevron 2015 Chevron U.S.A. Inc. All rights reserved. 26

Pre-drilling Administrative Requirements Lease Bond Exploration Plan Bond Development Plan Bond Oil Spill Financial Responsibility Oil Spill Response

27 Pre-drilling Administrative Requirements Lease Bond Exploration Plan Bond Development Plan Bond Oil Spill Financial Responsibility Oil Spill Response Plan Containment Demonstration for Wells in >1000 of water with Subsea BOP Photo courtesy of Transocean 2015 Chevron U.S.A. Inc. All rights reserved. 27

28 Securing Approvals and Permitting the Well Negotiate Joint Venture Execute Offshore Operating Agreement Operator Secure Internal Approvals Submit Well Proposal Non-Operators Secure Internal Approvals Conduct Operations *[Coastal Zone Management Act (CZMA) Consistency States] Required Permits/Approvals/Notifications Designation of Operator Approval for Oil Spill Financial Responsibility (OSFR) Oil Spill Response Plan Military Warning and Water Test Areas NPDES Permit Notice of Intent (NOI) Emergency Evacuation Plan (EEP) - DDS Written Notice of Ancillary Activity - G&G Exploration Activity or Development G&G Activity Ancillary Activity - Follow-up G&G Reports Written Notice of Ancillary Activity - Other Survey Activity or Study Initial Exploration Plan (Initial EP) Voluntary Unitization Agreement Application Approval for well or bottomhole location within 500 feet of lease line Application for Permit to Drill (APD) Application for Permit to Modify (APM) Rig Movement Report ROV Survey Report End of Operations Report (EOR) Welding Plan Approval to Flare Application for Downhole Commingling Approval to Measure Well Potential Test Report Request for Determination of Well Producibility * Agency BOEM BOEM BOEM DOD EPA USCG BOEM BOEM BOEM BOEM BSEE BSEE BSEE BSEE BSEE & USCG BSEE BSEE BSEE BSEE BSEE BSEE BSEE BSEE 2015 Chevron U.S.A. Inc. All rights reserved. Source: Chevron 28

Well Containment Marine Well Containment Company 10 Members (Chevron, ExxonMobil, Shell, ConocoPhillips, etc ) Rapid response system available to capture and contain oil in the event of a potential

29 Well Containment Marine Well Containment Company 10 Members (Chevron, ExxonMobil, Shell, ConocoPhillips, etc ) Rapid response system available to capture and contain oil in the event of a potential underwater well blowout The system is flexible and able to begin mobilization within 24 hours and can be used on a wide range of well designs and equipment, oil and natural gas flow rates and weather conditions. The system (15,000 psig capping stack) is engineered to be used in deepwater depths up to 10,000 and have initial capacity to contain 60,000 barrels & 120 MMCFG per day with potential for expansion. Two Floating, Production, Storage and Offloading ships available for cap and flow operations. Helix Well Containment Group Various Members Operate in up to 10,000 feet of water Two dual ram 10,000 & 15,000 psig capping stacks Intervention equipment to cap and contain a well Capture and process 55,000 BOPD & 95 MMCFPD 2015 Chevron U.S.A. Inc. All rights reserved. Source: Marine Well Containment Company 29

On Location Photo courtesy of Transocean

33 Develop a Commercial Discovery Photo courtesy of Transocean 1. Explore & Lease 2. Drill, Discover & Appraise 3. Plan Development 4. Design 5. Fabricate & Install 6. HUC, Start Up & Ramp Up 7. Production Operations 8. Plug & Abandon 2015 Chevron U.S.A. Inc. All rights reserved. Source: Chevron 33

Types of Offshore Fixed and Floating Facilities

Subsea Production System Source: API 2015

53 Hook-up, Commissioning and Production Photo courtesy of Transocean 1. Explore & Lease 2. Drill, Discover & Appraise 3. Plan Development 4. Design 5. Fabricate & Install 6. HUC, Start Up & Ramp Up 7. Production Operations 8. Plug & Abandon 2015 Chevron U.S.A. Inc. All rights reserved. Source: Chevron 53

Production Facility in the Gulf of Mexico

Thinking About the Future Requiring Vision and Focus to Achieve Success Fact: What is normal today was impossible 10 years ago Belief: What is impossible today will be normal 10 years from now

56 Thinking About the Future Requiring Vision and Focus to Achieve Success Fact: What is normal today was impossible 10 years ago Belief: What is impossible today will be normal 10 years from now Commitment to develop technology now is essential to achieve success in the future Set expectations that new technology will be delivered Strive for new breakthroughs Fund technology development before you need it Foster long term relationships with Vendors 30 % Recovery Factor Miocene Recovery Factor Casing Casing Strings(6) Strings(3) 50 % Recovery Factor < Natural Flow 10 % Recovery Factor Seismic Imaging Drilling Efficiency Quality Completion Seafloor Boosting In-Well Artificial Lift Lower Tertiary Recovery Factor Optimized Waterflood Enhanced Oil Recovery > 20 % Recovery Factor Source: Chevron 2015 Chevron U.S.A. Inc. All rights reserved. 56

$Completions Single-trip multi-zone frac pack In-Well artificial lift Reservoir surveillance Subsea Systems Seafloor boosting Seafloor separation Rigless well intervention 20,000 psi$ Ultra-Deepwater Developments Out to 10,000 WD Long Distance Tiebacks Flow assurance Long distance power and communications Host Facilities with Small Field Tie-ins Spare risers Spare deck

Ultra-Deepwater Developments Out to 10,000 WD Long Distance Tiebacks Flow assurance Long distance power and communications Host Facilities with Small Field Tie-ins Spare risers Spare deck

57 Deepwater Enabling Technology Subsalt Imaging 3D WAZ Coil WAZ Ocean bottom nodes Drilling Subsea Mudlift Drilling Next generation drill ships Improved landing strings Next generation BOPs Completions Single-trip multi-zone frac pack In-Well artificial lift Reservoir surveillance Subsea Systems Seafloor boosting Seafloor separation Rigless well intervention 20,000 psi Ultra-Deepwater Developments Out to 10,000 WD Long Distance Tiebacks Flow assurance Long distance power and communications Host Facilities with Small Field Tie-ins Spare risers Spare deck space Facilities Hull/mooring design standardization Compact modular processing systems Operations Intelligent wells and i-field Source: Chevron 2015 Chevron U.S.A. Inc. All rights reserved. 57

58 Technology Enhances Oil & Gas Recovery Subsea Mudlift Drilling (DGD) Seafloor Pumps Seismic Imaging (Ocean Bottom Nodes) Single-trip Multi-Zone Frac Pack In-well Retrievable ESP Source: Chevron 2015 Chevron U.S.A. Inc. All rights reserved. 58

Subsea Mudlift Drilling (formerly known as Dual Gradient Drilling) Technology Overview A Game Changer for Deep Water Eliminates the impact of water depth by

Restores riser margin ; well is overbalanced even if riser fails. Drilling performance, well integrity and predictability are improved.

Detects and allows near-instant reaction to wellbore pressure changes, reducing NPT. What is Required?

59 Subsea Mudlift Drilling (formerly known as Dual Gradient Drilling) Technology Overview A Game Changer for Deep Water Eliminates the impact of water depth by replacing the mud in the riser with seawater density fluid. Higher density mud used below the mudline to achieve same bottom hole pressure. Restores riser margin ; well is overbalanced even if riser fails. Drilling performance, well integrity and predictability are improved. Fewer casings, increasing potential for larger hole size at reservoir and for designer wells, like horizontal and multi-lateral wells. Detects and allows near-instant reaction to wellbore pressure changes, reducing NPT. What is Required? Subsea Rotating Device (SRD) Solids Processing Unit (SPU) MaxLift Pump (MLP) Blowout Preventer (BOP) Hydrostatic pressure effects removed by MLP & water in riser Drill String Valve (DSV) What is SMD? The Riser Risk Margin of a Blowout is Restored is Reduced Source: Chevron 2015 Chevron U.S.A. Inc. All rights reserved. 59

$Quality Completions Single Trip Multi-Zone Frac Pack Technology Enhanced Single Trip Multi-zone(ESTMZ TM *) Designed for long lower tertiary completions High production rates enabled by frac pack$ perforation runs 64 days for sandface completion ESTMZ TM* Cased Hole Completion (5 zone) 4 trips for completion installations including one perforation run 36 days for sandface completion *ESTMZ is

perforation runs 64 days for sandface completion ESTMZ TM* Cased Hole Completion (5 zone) 4 trips for completion installations including one perforation run 36 days for sandface completion *ESTMZ is

60 Quality Completions Single Trip Multi-Zone Frac Pack Technology Enhanced Single Trip Multi-zone(ESTMZ TM *) Designed for long lower tertiary completions High production rates enabled by frac pack completion Thick oil sand intervals require three to five frac-packs for effective stimulation 1,400 TVD Conventional Completion (5 zone) 14 trips for completion installations including five perforation runs 64 days for sandface completion ESTMZ TM* Cased Hole Completion (5 zone) 4 trips for completion installations including one perforation run 36 days for sandface completion *ESTMZ is a trademark of Halliburton Reservoir pressures, interval lengths, and completion design require improved perforating gun to survive downhole conditions In a five zone completion, Single Trip saves 10 trips in the hole and reduces completion time by 38 days per well Source: Chevron 2015 Chevron U.S.A. Inc. All rights reserved. 60

Remember What is normal today was impossible 10 years ago What is impossible

Questions Photo courtesy of Transocean 2015

Deepwater Exploration, Development and Production A Better Understanding?

Shell Exploration & Production 28 th USAEE North American Conference New Orleans, LA 12/10/2008 File Title Copyright: Shell Exploration & Production Ltd. Deepwater Exploration, Development and Production